4 Health-Care Questions Every Boomer Needs to Ask

As health care costs rise and the Medicare debate rages, Americans are expressing concern about whether they’re saving enough money to fund health care in retirement. A June 2011 survey by Wells Fargo found that just one in three non-retired people had a “great deal of confidence” or “quite a lot of confidence” that they’d be able to fund their health care needs in retirement. And a May 2011 survey by Charles Schwab found that 37% of baby boomers say that unexpected expenses like health and medical costs are the most worrisome aspect of retirement. What’s more, it’s not just that they can’t or aren’t saving enough, it’s often that they “don’t realize how much they need to have saved for health care,” says Colleen O’Brien, a vice president at Charles Schwab.

To help you figure out if you’ll have enough money to fund health care in retirement, O’Brien has outlined the four essential health-care questions you need to ask and gives advice on each:

1. How much money will I need each year for health care? A person who retires at 65 in relatively good health will need about $7,500 per year to cover out-of-pocket medical costs like Medicare deductibles and co-pays; if you’re not in such good health, that number might be more like $10,000 per year.

2. How long will I need these funds? Assume that you’ll live until about age 90, which means you’ll need to save anywhere from about $200,000 – $350,000 for out-of-pocket health-care expenses in retirement for a 30-year period. However, you’ll also need to take into account your family’s health history (is your mom alive and well at 95?) and your own lifestyle (do you exercise each day and eat healthy?) to determine whether you might live well past 90.

3. Will my savings and investments deliver enough of a return to pay for health care? Sit down with your financial adviser to talk about how to fund your out-of-pocket health care costs. The essential question: Will this nest egg generate enough income to provide you with between $7,500 and $10,000 per year for health care, while still providing you with the ability to fund your other needs like food and housing? Ask your adviser to run a variety of scenarios for you using both conservative and more ambitious rates of return.

4. Should I buy a long-term care policy? The average assisted living facility charges $39,516 per year, the average nursing home $83,585 per year for a private room, according to the MetLife Mature Market Institute — and these costs often aren’t covered by Medicare. So it’s a good idea to look into buying a long-term care policy. Click here to determine if LTC insurance is right for you and to evaluate individual policies. Buy these policies in your 50s or early 60s to save money.